Monday, June 04, 2007


US$ Stumbles On Economic Data

The Associated Press reports on currencies. "The dollar weakened Monday, dragged down by weaker-than-expected factory orders in the United States. The 13-nation euro climbed to $1.3488 in late New York trading from $1.3443 late Friday after the U.S. Commerce Department reported orders to factories rose less than expected in April. It was the weakest result in three months and less than half of the 0.8 percent increase that analysts expected."

"Markets are closely watching U.S. economic data for pointers to the Federal Reserve's future interest rate course. The Fed has left its key interest rate unchanged at 5.25 percent over recent months, even as the European Central Bank has raised the cost of borrowing seven times since December 2005. Analysts expect the ECB to raise the rate to 4 percent when it meets Wednesday."

"The British pound rose to $1.9904 from $1.9821, with markets anticipating that the Bank of England will keep its rate unchanged at 5.5 percent when it meets Thursday."

"The dollar fell to 121.82 Japanese yen from 122.06 yen, even as China's main stock index plunged 8.3 percent, its biggest one-day fall since a February drop that triggered a global market sell-off."

'In other trading, the Canadian dollar continued its climb against the greenback after breaching 94 cents Friday for the first time in 30 years. The U.S. dollar bought 1.0588 Canadian dollars late Monday after hitting a low of 1.0547, or 94.81 U.S. cents to 1 Canadian dollar, earlier in the day. The U.S. dollar bought 1.0618 Canadian dollars late Friday."

"The dollar also weakened against the Swiss franc, falling to 1.2235 from 1.2303 late Friday."

From MarketWatch. "Gold futures failed to find a foothold in positive territory Monday as traders locked in gains late in the session following the metal's rally last week. Gold for June delivery closed down 50 cents at $670.70 an ounce on the New York Mercantile Exchange. The August contract, which trades on the highest volume, fell 60 cents at $676.30 an ounce."

"'Having broken from its $655-to-$665 range, gold is likely to generate some further momentum in the week ahead,' said James Moore, metals analyst at He pegged gold's resistance at $675-to-$682 an ounce and said its 'major target' is to be found at $694 an ounce."

"Gold's lackluster performance came amid rallying crude-oil prices and a weakening dollar. Crude-oil futures rallied Monday, boosted by a combination of factors, including an increase in fuel demand, escalating tensions between Russia and the West, and the risk of a cyclone hitting the Persian Gulf."

July silver edged up 5 cents at $13.745 an ounce. July platinum closed up $7.40 at $1,303.0 an ounce. September palladium closed up 5 cents at $377.50 an ounce."

"Gold and coal producers in South Africa have been called on to raise wages for unionized workers by at least 15% as collective bargaining looks set to begin."

"Gold production in South Africa amounted to 62,806.7 kilograms in the first quarter of the year, down 7.6% on the same three months the year before, the Chamber of Mines said in late May. It added cash production costs were almost 20% higher and total operating costs before capital expenditure up nearly 18%."

From SmartMoney. "Investors in a large exchange-traded fund that holds gold bullion have been selling shares recently in response to a pullback in the precious metal, offering a stark reminder of the dramatic swings often seen in gold prices."

"The amount of gold held by StreetTracks Gold Shares has slipped from 500.7 tons on April 19 to 463.6 tons late last week. Riding a bull market for gold, the ETF has gained about 52% since inception, according to its backers."

"Yet gold prices fell more than 3% in May, in part due to a recovery in the U.S. dollar, easing inflation fears and expectations of lower demand from China and India. 'Gold is very different, even different from other commodities such as oil, for cultural reasons,' said Katharine Pulvermacher, managing director of investment research and marketing at the World Gold Council. 'Gold is seen as a wealth protector.'"

"About 70% of global demand for gold is for jewelry, roughly 10% is for industrial usage and the rest is for investment purposes, she said."

"Launched in November 2004, StreetTracks Gold Shares was the first U.S.-listed gold ETF and invests directly in gold bullion rather than holding shares of mining stocks. The amount of gold held in the vault had been climbing before the recent sell-off. In fact, an additional vault had to be built to make room for more gold, Pulvermacher said."

"One reason for the ETF's popularity is that it makes investing in gold easier for individuals and institutions because it removes the costs of buying and storing the metal."

"There are seven gold-bullion ETFs listed globally, Pulvermacher said. In the U.S., besides StreetTracks Gold Shares, iShares Comex Gold Trust also invests in bullion and has about $964 million in assets, according to sponsor Barclays Global Investors."

"PowerShares DB Gold Fund is an ETF-like security that invests in futures contracts to reflect the performance of gold. Meanwhile, ETFs such as Market Vectors Gold Miners and SPDR S&P Metals & Mining hold mining stocks."

"Some observers say the rise of gold-bullion ETFs could increase the metal's price volatility since it's easy to jump in and out of funds that trade throughout the day."

"Individual investors in StreetTracks Gold Shares, which holds enough gold to qualify as the world's 11th-largest central bank, have become net sellers in recent weeks as they locked in profits and scaled back their expectations, said Jon Nadler, analyst at Kitco Bullion Dealers."

"'Gold ETFs have facilitated the entry of players who do short-term trading, which tends to add to the snowballing effect,' he added. Moreover, gold may be moving away from its traditional role as 'life insurance for your portfolio,' he said. 'Gold may end up being treated as just another asset to play for profit.'"

"Sonya Morris, an analyst at investment researcher Morningstar Inc., said a gold ETF, used appropriately, can provide useful diversification for long-term investors since it tends to behave differently from other investments. 'The recent pullback shows speculating on gold is a difficult and dangerous game to play,' the analyst said."

"'All the good news for gold is already out there, as it has been for a while,' wrote Kitco's Nadler in a report late last week. 'The trouble is that the not-so-good news is overshadowing the situation at the moment.'"

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